Politics is about persuading voters about priorities.
To do so, facts are important, but they can also be misused in an attempt to win the debate.
Here the facts fight back. This site presents the facts to help keep the debate clean and to persuade politicians and others to stick to the facts.

Cut tax and increase revenue? > Check the facts

Senator Day claimed on Sky News that: “evidence from around the world is that if you want more revenue, and I’m not suggesting we give them any more revenue, but if they want more revenue, they should lower taxes and not increase them.” [15 August 2014]

In each of his examples, Day uses a different standard to determine success (e.g. an increase as a proportion of GDP and in absolute terms; personal income tax and corporate tax, etc.). Here, we focus on corporate tax rates.

A study of the tax rates of 12 OECD countries found that Sweden was the only example where tax revenue should increase by cutting the corporate tax rate, as company tax was set at 60 per cent, nearly double the OECD average. Day does not mention the other 11 countries.

Russia’s introduction of a flat 13 per cent corporate tax rate reduced tax evasion. Revenue increased due to a crackdown on under-reporting. An IMF report found no corresponding productivity increase, showing that cutting company tax rates did not generate additional investment or activity.

Australia’s company tax rate was reduced in 2001 from 34 to 30 per cent. Company tax as a percentage of GDP fell in the year following the tax cut, but it is impossible to determine whether this was as a result of the change to company tax rate. Revenue also fell in 2009-10 without any change to the company tax rate. Company tax receipts are volatile being affected by many variables, including the global economic environment. For this reason, one cannot directly deduce that any change to company tax receipts is a result of changes to the company tax rate. Nevertheless, as the graph below shows, company tax as a proportion of GDP has been increasing for 30 years, before and after the 2001 cut.

The Coalition Government estimates that a 1.5 per cent cut in the company tax rate will mean $5 billion less tax revenue collected, not more, as Day’s claim would suggest. Australia’s economic growth, which improves tax revenue, is not promoted by cuts to company tax rates. Since 2001 unemployment has averaged 5.2 per cent despite a 30 per cent company tax rate. Between 1950 and 1987, to contrast, when the company tax rate was 45 to 49 per cent, the average unemployment rate was 3.3 per cent. Similarly, real economic growth averaged 3.8 per cent between 1960 and 1987 but fell to 3.1 per cent in the period since 2001.

So how did they calculate the unemployment rate in the 50s, when the dole was hardly worth applying for due to the low level paid and the stigma attached. Mind you unemp[loyment was bound to be low at a time when women weren’t allowed to work full time in most cases and a significant proportion of men had just come back from war.

Why

Between elections governments are held to account through debate. This debate takes place in the parliament, media, in workplaces, at BBQs and parties, around the kitchen table and online.Politicians, pundits and interest groups attempt to influence the debate and persuade us which side of the debate to take.

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Should the Australian government encourage renewable forms of energy or do we need to support fossil fuels? Is returning the budget back to surplus the number one priority and if so should be decrease spending or increase revenue? Should we focus on industrial relations or indigenous recognition?

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There are, of course, no right answers to such questions. But to use the complexity of a policy issue to cloud debate with half-truths and misrepresentation of the facts to win the debate undermines the democratic accountability of government.

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The media plays an important role in presenting an even handed account of the debate and ensuring a range of voices are heard. In turn politicians are keen to influence the debate through the media's reporting. Undue influence risks silencing some voices from the debate.
As the political debates continue Facts Fight Back will provide a timely and accessible source of information to help keep the debate clean and and ensure the public, journalists and the politicians themselves keep track of who is sticking to the facts.